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What are the Four Elements of Supply Chain Management?

16/04/19 Lucy Tarbox Consultant, Manufacturing & Operations

A growing business needs to have an efficient and effective Supply Chain which can mainly be enabled through IT. Now the question arises, why is it necessary?

The supply chain is a sequence of processes that must be completed to produce and distribute a product or commodity.

This commodity may be goods or services, but either way, there needs to be a clear manufacturing path for the goods or services to be produced. Having a strong supply chain is crucial to that goal, and so is managing it effectively for the supply chain to achieve the best results.

Lucy Tarbox, Redline’s Manufacturing and Operations Recruitment Consultant looks at the four main elements to supply chain management in today’s manufacturing sector.

Manufacturing businesses have long referred to the process of getting goods to customers as the supply chain. However, since so many businesses rely on manufacturers, the term has made its way into the corporate world as well. Each process relies on the others to provide a seamless path from plan to completion.

Element One: Integration

“Integration is at the heart of the supply chain and is considered as the brains and heart of the supply chain process.” says Lucy. “As with any project, planning is essential to long-term success. Integration is the process of technology which closely coordinates with supply chain functions and elements. This allows the supply chain to get the details of all the actions and interactions. The key component of integration is data and its collection, storing and use. Overseeing supply chain integration means coordinating communications between the rest of the supply chain to produce effective and timely results in the manufacturing process. Often this means exploring new software or other technological means to foster communications among departments, whilst improving communication reduces errors which cost time and money.”

Element Two: Operations

As important as strategy is to maintain a strong supply chain, day-to-day operations are the backbone of the work manufacturers undertake. Supply Chain Managers monitor the processes being performed and ensure everything remains on track. Many of today’s manufacturers operate using lean manufacturing strategies and techniques, which means processes are constantly evaluated to achieve maximum performance and efficiency. Whether it’s monitoring processes or equipment to achieve maximum performance or reducing work or shift patterns during production slows down, the operations team can bring major improvements to the supply chain.

Element Three: Purchasing

You can’t make something from nothing. Sourcing is the process of finding, evaluating, and engaging suppliers to provide goods and services to business. Procurement is the process of purchasing goods and services.  In a B2B sale, the procurement function will usually manage both the sourcing and the purchasing functions ensuring an organisation has everything required to manufacture a product or deliver a service, including materials, supplies, tools and equipment. This means staying ahead of the process so you have everything needed is available on time prior to the process. Without the right purchasing personnel, an organisation could find the materials are not available on time, delaying manufacturing production, or that excess inventory is accumulated, straining the company’s cash flow.

In the earliest days of the automobile industry, Henry Ford made a decision to own and control the complete supply chain—from the mines which provided the ore, to the factories which made the glass. Raw materials—iron ore, coal, and rubber, all from Ford-owned mines and plantations—came in through one set of gates at the plant while finished cars rolled out the other. Today, it is exceptionally rare for a company to try to own all the raw materials for a physical product. Even software products use pre-existing software frameworks and code.

Businesses have shown success in managing external suppliers and have found that it is beneficial to source some materials and services in order to focus on particular areas of specialisation. 

Element Four: Distribution

The supply chain ends when the product or service is delivered to the customer. However, delivering the product or service means having a well-planned and managed distribution and logistics organisation. Most companies today use logistics software to manage the shipment process, whether they handle it on their own or outsource to a third-party provider.

Such logistics service providers mainly deal with services such as transportation, warehousing, delivery, and other related operations. However, as these processes are handled, products are moved expeditiously from the warehouse to the customer, a balance between demand and supply is critical for business networks to grow especially globally.

How the four elements work together?

“The four elements of supply chain management must work cohesively for everyone’s benefit.” says Lucy. “Not only do end-customers reap the benefits; employees themselves also reap the rewards. A well-oiled supply chain is key to a harmonious work environment because when processes work efficiently, it achieves better results.”

“Businesses which have a strong supply chain management system in place put great emphasis on all the four elements listed, and also ensure that management, as well as the teams at various levels, work efficiently... Profit is the bottom line and to make sure that the business achieves this, it is essential that the supply chain does not have any gaps. Any snag should be dealt with immediately and the weak links repaired or removed.”

“Demand and supply are two of the most important aspects of a business. For any business to be successful, trends, with respect to demand and supply, need to be studied carefully while implementing an effective plan of execution. A supply chain management system is required not just for the timely manufacture of goods; it is also a very critical system for ensuring that customers’ requirements are met effectively.”

Are you looking for your next Supply Chain Job, Purchasing job or Supply Chain Management job in a high-tech company?

Redline’s Manufacturing Recruitment and Operations division specialises in the selection of both permanent, contract and interim professionals throughout the UK and Europe. Since its formation in 1982, the manufacturing jobs division has been staffed by expert Consultants and industry professionals giving them a unique perception of the full product manufacturing life cycle including all aspects of production, supply chain jobs, and purchasing jobs.

For more information on Redline Group's latest Manufacturing and Operations jobs, please contact Lucy Tarbox on 01582 878829 or email LTarbox@RedlineGroup.com

Redline has undertaken research into the candidate offer to acceptance ratio for many years. For a copy of our most recent research, and how this may help you reduce “Offer declination”, please click here.